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Wish you all a Happy Deepawali
& Shubh Samvat 2074
October 2017
Equity Market Outlook 2017-18E
Samvat 2074 Outlook: Structural changes to push Investment Cycle
Samvat 2073 had two major structural events i.e. Demonetization and GST. Both the events did impact the sentiments of business community as well as pressure on GDP growth. On long term basis the broad market is expected to generate better returns compared to last year.
We expect an expansion in economy and investment cycle lead by:
Domestic flow in MF continue to push market sentiments up.
Valuation and excessive liquidity flow.
Discretionary consumption and consumer lending sector have seen a large uptick.
Capacity utilization improving due to global commodity price movement.
Credit cost coming down in the Banking system.
Corporate earnings are likely to see upward revision given that the positive effect of various reforms.
Pickup in global growth is on track, with global output projected to grow by 3.5% in 2017 and 3.6% in 2018. This will have positive impact on emerging markets including India.
On overall basis Indian markets seem to be reasonably valued, given the delay in revival of corporate earnings, which may happen after few quarters. We believe there are fundamental transitions underway in the Indian economy in coming quarters. We see the structural change in the investment habit of Indian will continue to support the market through Mutual fund SIP investment way. Although markets seem to be slightly at a premium valuation, but the domestic inflows have been strong, there is certainly no big risk of a major correction
We have handpicked top investment ideas for you for the coming Samwat 2074. Happy investing…!
Muhurat Ideas 2017-18
Investment Ideas 2017-18 SL No NAME SECTOR MCAP Rs Cr CMP Rs
1 MARUTI SUZUKI INDIA LTD CARS & UTILITY VEHICLES 237803 7872
2 BHARAT PETROLEUM CORP LTD REFINERIES & PETRO 106098 489
3 BHARAT FORGE LTD INDUSTRIAL PRODUCTS 29785 640
4 PNB HOUSING FINANCE LTD HOUSING FINANCE 24838 1491
5 GODREJ PROPERTIES LTD REALTY 13721 634
6 KEC INTERNATIONAL LTD HEAVY ELECTRICAL 7770 302
7 BIRLA CORPORATION LTD CEMENT & CEMENT PRODUCTS 7750 1006
8 BLUE STAR LTD CONSUMER ELECTRONICS 7522 785
9 IRB IFRASTRUCTURE DEVELOPERS LTD ROADS & HIGHWAYS 7262 207
PRICES AS ON 13th OCTOBER 2017
MidcapIdeas 2017-18 SL No NAME SECTOR MCAP Rs Cr CMP Rs
1 GUJARAT STATE FERTILIZERS & CHEMICALS LTD FERTILIZERS 5389 135
2 FIRSTSOURCE SOLUTIONS LTD BPO/KPO 2841 41
3 RADICO KHAITAN LTD BREWERIES & DISTILLERIES 2484 187
4 FUTURE ENTERPRISES LTD DEPARTMENT STORES 2397 51
5 HIKAL LTD PHARMACEUTICALS 2043 249
6 HUHTAMAKI PPL LTD CONTAINERS & PACKAGING 1750 232
7 SURYA ROSHNI LTD LIGHTNING & STEEL 1346 307
8 TOURISM FINANCE CORPORATION OF INDIA LTD FINANCIAL INSTITUTIONS 1131 140
9 GODAWARI POWER & ISPAT LTD IRON & STEEL 416 118
Muhurat
MARUTI SUZUKI INDIA LTD
Investment Rationale
Building strong product portfolio: Maruti has historically built Strong brands and that has resulted to
maintain the lion's share of small car and support healthy volume growth. New launch like Brezza,
Baleno and IGNIS have performed better than market expectations.
Uptick in rural demand: Expect strong volume growth in 2Q, owing to festive season demand and
uptick in rural space. Growth is driven by strong volume growth of Baleno and market share gain in
UVs. MSIL’s market share improvement will be fuelled by rural demand recovery and support from new
launches. Maruti plans to easy of waiting period pressure of its top-selling models Baleno and SUV
Brezza, with parent Suzuki ramping up production at the Gujarat plant by adding a second shift from
this month
Eyes toward electric vehicles: Company plans to introduce EVs as soon as market sets to swift from
traditional vehicles to EV segments. It is focusing on hybrid technology, which is a step toward electric
mobility. Li-ion battery plant, which is being set-up by JV between Suzuki, Toshiba and Denso, would
help to reduce cost of hybrids and EVs.
Network expansion: The Gujarat plant will make MSIL’s business asset-light, allowing the management
to focus more on marketing. MSIL has plans to expand its Nexa network for the premium segment to
400 outlets by 2020 from 200 currently.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 65105 77316 19777
EBIDTA 8888 10358 2613
PAT 5496 7510 1628
EPS 181 248 51.52
Share Holding Pattern
KEY STATISTICS
CMP Rs. 7872
MARKET CAP Rs. 237803
PRICE/BOOK 6.40
PE 31.74
DIVIDEND YIELD 1.24%
52 WEEK L/H 4769/8200
Cars & Utility Vehicles BUY
Promoter
56.21%
Public 43.79%
BHARAT PETROLEUM CORP LTD
Investment Rationale
Market deregulation: Freedom to open new fuel stations as Retailers allowed to set their own prices.
Increasing trend in fuel Spending: Expect Increasing income around 3X increase in avg. income (2010-
2020) will lead to spend more on fuel consumption. Additional to this Growing workforce will increase
by 137mn which will be added to the workforce by 2020.
Kochi terminal would fuel growth: Kochi terminal is stabilizing post expansion from 9.5mmt to 15.5mmt
and likely to touch utilisation over 90% by end of FY18 which would fuel growth. Further, its petchem
capacity is expected to come by end CY18 with a total capex of Rs45 bn.This would lead to ~US$
2/barrel improvement in Kochi refinery GRMs and also Crude throughput to increase with full capacity
utilisation at Kochi.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 219226 243747 66766
EBIDTA 12935 13512 1225
PAT 7584 8720 744
EPS 57.84 66.51 3.79
Share Holding Pattern
KEY STATISTICS
CMP Rs. 489
MARKET CAP Rs. 106098
PRICE/BOOK 2.28
PE 7.35
DIVIDEND YIELD 5%
52 WEEK L/H 399/546
Refineries/ Petro-Products BUY
Promoter 54.93%
Public 45.07%
BHARAT FORGE LTD
Investment Rationale
Government policy boon for the Industrial business: The Make in India policy has led company’s
growth in its industrial segment and has helped to overcome the temporary slowdown in its Heavy
Commercial Vehicle business. Industrials contributed 43% of the domestic revenues FY2017.
Focus on Asset Light Capex Approach: The company has shifted its focus from capacity oriented to
capability oriented approach. The qualified employees help in the development of the company by
developing new product designs and cost effective products that serve for the needs of the clients and
accordingly capex is done.
Direction going forward Across segments: The continuous and increasing focus of company on R & D
will help it to develop high technology and also increase its capacity utilisation which will increase
production across all segments.
Growth momentum to continue: Increasing focus on new verticals like like railways, aerospace,
defence, mining & renewables has been beneficial for the company and is boosting the numbers of the
company. In the past few months, there has been a significant improvement in US Class 8 truck net
order. The growth guidance for Class 8 truck industry is 10-12%.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 7001 6598 1257
EBIDTA 1408 1251 333
PAT 675 710 175
EPS 29.15 30.26 7.52
Share Holding Pattern
KEY STATISTICS
CMP Rs. 640
MARKET CAP Rs. 29785
PRICE/BOOK 3.62
PE 21.15
DIVIDEND YIELD 0.72%
52 WEEK L/H 383/659
Industrial Products BUY
Promoter 45.75%
Public 54.25%
PNB HOUSING FINANCE LTD
Investment Rationale
Well-diversified loan book: PNBHF has loan assets of 44000Cr and it caters to both the salaried and
self-employed customer segments, but now the focus is mainly on the urban self-employed segment
.The housing loan book accounts for 59% and non-housing loan book now accounts for 41% of the
total loan book year ended 2017. This loan mix has proved beneficial in the retail segment without
impact on overall company margins & profitability.
Better Quality of assets against its peers: PNBHF’s GNPA stands at 0.43% while GNPL ratio stood at
0.22% as of end-FY17, the lowest among peers. In the construction finance loan book, the NPA is nil,
mostly because 88% of projects funded have witnessed sales velocity in excess of the company’s
assumptions.
Boost from government reforms: PNBHF undertook an exhaustive restructuring and turnaround
exercise over FY11-16 increasing the performance significantly, making it the fifth largest HFC in India.
The falling interest rates, largely stable real estate prices and boost from government schemes makes
a sweet spot for the housing finance sector in the foreseeable future.
Increasing presence in rural space: Management plans to open 23 new branches in FY18, and expects
another 25 branches over FY18-20. The company now has 66 branches in 40 cities, and aspires to
achieve at least 8-10% market share (among HFCs) in every city where it operates.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 2697 3907 1192
EBIDTA 2377 3466 1041
PAT 326 524 185
EPS 27.48 36.72 11.12
Share Holding Pattern
KEY STATISTICS
CMP Rs. 1491
MARKET CAP Rs. 24838
PRICE/BOOK 4.42
PE 40.60
DIVIDEND YIELD 0.51%
52 WEEK L/H 789/1715
Housing Finance BUY
Promoter 38.86% Public
61.14%
GODREJ PROPERTIES LTD
Investment Rationale
Leveraging the Brand Name: Godrej name is next to quality in this industry. It has different land bank
strategy like JV with land owners that reduces its land cost and also ties up with developers as a
Development manager which helps it earn 10-11% of revenue for branding, marketing and selling of
the project.
New project pipeline continued the scale up in operations: Financial Year 2017 has been a strong year
for business development. It has added 7 new projects with saleable area of 18mn Sq ft. latest
Bookings were at all-time high of nearly INR 1,500 crore and with their operating cash flow registering
a positive INR 659 crore.
New Government implementations: Godrej have completed the RERA registration of all their projects
in Maharashtra, Karnataka, Chennai, Ahmedabad and NCR. Post implementation of RERA,
opportunities for new project acquisitions are expected to increase, especially for organised
developers.
The combination of GST, the Real Estate Regulatory Act, an improving economic environment, lower
inflation, lower interest rates has led to much better affordability and are expected to revive housing
demand.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 2122 1582 248
EBIDTA 137 250 -18
PAT 160 207 23
EPS 7.56 9.6 1.08
Share Holding Pattern
KEY STATISTICS
CMP Rs. 634
MARKET CAP Rs. 13721
PRICE/BOOK 6.84
PE 66.04
DIVIDEND YIELD -
52 WEEK L/H 285/679
Realty BUY
Promoter 74.91%
Public 25.09%
KEC INTERNATIONAL LTD
Investment Rationale
T&D business regains momentum by expanding beyond boundaries: Power, transmission &
distribution is KEC core business vertical. The Company’s unprecedented endeavour led to a
resurgence of its Substation business resulting in KEC spreading its wings significantly in domestic &
International Substation arena, both on the Air Insulated Substation (AIS) and Gas Insulated
Substation (GIS) front.
Risk mitigation through diversified geographical presence: KEC with decades of executing experience
has stepped into 63 countries across all continents and currently executing projects in 37 countries
which contributed nearly 51% sales from abroad.
Strong order inflows improving revenue visibility: As on June 2017 end, the order book stood robust at
Rs 135bn (up 30.1% YoY). Further, KEC is L1 in orders worth Rs 45bn. Improving order inflows in the
T&D business, led by TBCB and substation orders, gives positive stand on the better T&D business
going forward.
Energy & Rail– Priorities of the New Government sector in focus: The Govt proposed 100% rural
electrification by 1st May 2018 which act optimistic for the company’s T&D business and also
proposed 3500km of railway lines to be commissioned in FY18 which is good for KEC as it is focusing
more on Railway business.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 8709 8755 1895
EBIDTA 692 818 176
PAT 148 305 63
EPS 5.35 11.86 2.45
Share Holding Pattern
KEY STATISTICS
CMP Rs. 302
MARKET CAP Rs. 7770
PRICE/BOOK 4.89
PE 25.46
DIVIDEND YIELD 0.77%
52 WEEK L/H 111/337
Heavy Electrical Equipment BUY
Promoter 50.86%
Public 49.14%
BIRLA CORPORATION LTD
Investment Rationale
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 3762 4981 1667
EBIDTA 286 623 240
PAT 168 219 43
EPS 21.78 28.5 5.61
Share Holding Pattern
KEY STATISTICS
CMP Rs. 1006
MARKET CAP Rs. 7750
PRICE/BOOK 2.34
PE 35.29
DIVIDEND YIELD 0.88%
52 WEEK L/H 609/1025
Cement Products BUY
Promoter 62.90%
Public 37.10%
Birla Corp recently acquired the entire cement business of Reliance Infrastructure for an Enterprise
Value of Rs. 4,800 crores. This acquisition has provided the company with the ownership of high-quality
assets, taking its total capacity to 15.5 mtpa. After this becomes one of the largest players in the Satna
cluster with 22% market share. It has cement plants in Rajasthan, Madhya Pradesh, Uttar Pradesh and
West Bengal.
New investment to further increase capacity: It is planning to invest Rs 2,400 cr for setting up a 4 mn
tonne clinkerisation unit with a grinding facility at Mukutban in Maharashtra, after the completion of the
new plant, the total cement production capacity of the company would touch 20 mtpa from the present
15.5 mtpa
Cement demand to pick fast as Governments continued focus towards infrastructure development,
affordable housing, smart cities, concrete roads etc is expected to lead. To increased demand for
cement an increase of 38% and 23% in the government’s fund allocation in its annual Budget for the
housing and roads sectors, respectively, to Rs 23,000 cr and Rs 64,900 cr, is expected to boost cement
uptake.
Positive development with respect to Chanderia mining ban may trigger increase in margins: The mining
operation at the Chanderia plant (that is ~25% of total capacity of 15.5 MT) has been suspended since
August 2011 so any favorable outcome could further increase margins to historic levels near 20%.
BLUE STAR LTD
Investment Rationale Strong leadership position: Blue Star continued to maintain its leadership position in Electro-
Mechanical segment – major orders won during the year includes Amazon, Ireo, Lodha developer,
Deloitte, Wipro etc. Blue star has an overall market share of 11% and are expecting it to increase to
15% in few years.
Focus more on Inventor AC: Inverter ACs are the future of air conditioners in India and Blue Star is
aligned to this. Inverter ACs accounts for 18% of its sales v/s 12% for the industry. Blue Star expects
inverter ACs to account for 50% of the industry in the next few years.
Backward integration initiative to increase margins: Blue Star plans to do the manufacturing of indoor
units of air conditioner and in a couple of years it will be looking at making some electronics in-house
which are currently bought from other players or is imported. This will help them increase their
margins.
New geographies for expansion: They are strengthening their global footprint in countries like Middle
East, Africa, ASEAN countries etc. These new geographies will increase its product distribution.
Electro Mechanical segment and air packed conditioners are expected to increase by 20-25% and
billing orders to increase by 15% by FY 18.
Product development: Blue Star has recently forayed into water purifier business as its new product in the
portfolio. They launched 13 models. They are positive on this business and this market is increasing at 22%
CAGR. Their total order book has increased by 17% since last year.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 3830 4424 1468
EBIDTA 215 222 88
PAT 105 123 57
EPS 10.99 12.89 6.11
Share Holding Pattern
KEY STATISTICS
CMP Rs. 785
MARKET CAP Rs. 7522
PRICE/BOOK 29.4
PE 60.9
DIVIDEND YIELD 1.08%
52 WEEK L/H 435/828
Consumer Electronics BUY
Promoter 38.96%
Public 61.04%
IRB INFRASTRUCTURE DEVELOPERS LTD
Investment Rationale
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 5128 5846 1816
EBIDTA 2660 3048 817
PAT 640 715 238
EPS 18.18 20.36 6.77
Share Holding Pattern
KEY STATISTICS
CMP Rs. 207
MARKET CAP Rs. 7262
PRICE/BOOK 1.38
PE 10.17
DIVIDEND YIELD 2.12%
52 WEEK L/H 178/272
Roads & Highways BUY
Promoter
57.73%
Public 42.63%
Efficient, experienced and focused road infra developer: IRB has extensive experience and successful
track record of structuring and executing road BOT concessions. In-house it has 22 BOT E&C
division projects in portfolio and 14 BOT projects in operation and an in-house construction division.
It’s one of the largest BOT portfolios in the country - total length of > 10,000 Lane Kms as BOT
operator.
IRB’s order backlog of Rs 99.6bn (2.8x FY17 EPC revenue) provides strong growth visibility on EPC
front with EPC revenue expected to grow 10% in FY18E. Toll collection got impacted in Surat Dahisar
and Bharuch Surat on account of Versova/Narmada bridge repairs (now reopened) and expected to
normalize in FY18E with 5-7% toll revenue growth. Mumbai – Pune toll collection grew 11% YoY due
to shifting of traffic from under construction Mumbai -Goa project.
Balance sheet deleveraging post InvIT to lead to credit rating upgrade: IRB Infra one of the largest
road developers in the country to benefit from its infrastructure investment trust (InVIT) with this the
company will be able to reduce debt and infuse cash in the business from the proceeds raise close to
Rs 6,000 crore. The company's consolidated debt will reduce to Rs 3000 crore and the debt-equity
ratio will fall near to 1.8 from 3. IRB will also needs equity commitment of over Rs 2,400 crore for its
road portfolio in the next three years, which will be partly funded through the fund raised. In addition,
debt reduction will help in improving credit profile, which may lower the cost of borrowings in the
future.
GUJARAT STATE FERTILIZERS & CHEMICALS LTD
Investment Rationale
Firm Capro-Benzene spread: Historically Capro-benzene a major input in chemical business earlier the
spread was at US$825/Mt which has now increased in the range of$900-1000 which will flow down to
increase profitability of chemical industry. Also diversification in industrial product segment by adding
Nylon capacity and melamine capacity will reduce risk of the segment from fluctuations in capro benzene
spread.
GSFC is planning to commission Phosphoric acid plant at Sikka for a cost of INR 12 bn in next 3 years,
this could achieve saving of $100/MT and will also reduce dependency on import.
GSFC faced increase in the raw material prices which decreased its margins but in Q2FY18 prices have
reduced now and will boost operating margins in the coming quarters. The management has guided for
10% growth in topline and 15% PAT CAGR on account of 15% volume growth in fertilizer for FY 18.
GSFC expects completion of Melamine plant by FY19 which will add INR 4 bn to the topline. Caprolactum
quality improvement project is expected to be completed in H1FY18. Management expects higher
realization and additional capacity of 3 MT/day from this plant.
Company is planning to install 153 MW windmill and 10 MW solar power plant. GSFC will also get tax
benefit (~24% vs 33%) due to renewable power sources. Recovery in the working capital burden is
expected as Subsidy of INR 7 bn (INR 2 bn paid) is expected by FY18.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 6326 5477 1176
EBIDTA 656 489 80
PAT 416 424 40
EPS 10.44 10.65 1.02
Share Holding Pattern
KEY STATISTICS
CMP Rs. 135
MARKET CAP Rs. 5389
PRICE/BOOK 0.81
PE 12.67
DIVIDEND YIELD 1.68%
52 WEEK L/H 78/150
Fertilizers BUY
Promoter 37.84%
Public 62.16%
FIRSTSOURCE SOLUTIONS LTD
Investment Rationale
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 3217 3555 850
EBIDTA 390 437 73
PAT 261 279 65
EPS 3.89 4.14 0.96
Share Holding Pattern
KEY STATISTICS
CMP Rs. 41
MARKET CAP Rs. 2841
PRICE/BOOK 1.38
PE 9.9
DIVIDEND YIELD -
52 WEEK L/H 30/49
BPO/KPO BUY
Promoter 54.82%
Public 45.18%
Firstsource a leading customer experience expert, has been recognised as a “leader” in the
International Association of Outsourcing Professionals’ Global Outsourcing 100 List for 2017.
FSL to report moderate revenue growth with improvising operational efficiencies, focus on customer
management and healthcare segment which will help to pick up order pipeline.
Company expects remaining quarters’ of FY18 the growth momentum to bounce back led by deal
closures and mortgage business attaining breakeven in Q1 leading to a better H2FY18E performance
than H1FY18E. For FY18E, the management expects revenue growth to be in line with industry growth
rates (8-10%) while on margins to increase 50-60 bps YoY in FY18E led by growth momentum from
Q2FY18 onwards.
FSL’s debt repayment plan is on track with net debt at US$76.2 million as on June 30, 2017.
Management expects to become debt free by FY19E.
Firstsource, a RP-Sanjiv Goenka Group company is a customer experience expert and global provider
of customised BPM (Business Process Management). Firstsource business partners with brands
including FTSE 100, Fortune 500 and Nifty 50 companies in the Banking, Financial Services and
Insurance, Healthcare, Telecommunications and Media sectors. Operate in India, the Philippines, the
UK and the US.
RADICO KHAITAN LTD
Investment Rationale
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 4271 4868 1375
EBIDTA 188 212 62
PAT 78 81 26
EPS 5.87 6.07 1.93
Share Holding Pattern
KEY STATISTICS
CMP Rs. 187
MARKET CAP Rs. 2484
PRICE/BOOK 2.38
PE 30.8
DIVIDEND YIELD 0.58%
52 WEEK L/H 106/189
Breweries & Distilleries BUY
Promoter 40.43% Public
59.57%
Transformed itself from a major spirits supplier to a large branded products company in the IMFL
(Indian Made Foreign Liquor) space since existence. IMFL accounted for 65% of its revenues in FY17. Its
brands, 8PM whisky, Magic Moments vodka, Contessa rum and Old Admiral brandy, are among the top
selling brands in their category. Premium brands accounted for 44% of its IMFL.
Radico strong sales and distribution network covers 90%in retail outlets with presence in retail and off
trade outlets in the relevant segments in different parts of India. At present it has sales through 55000
retail outlets Today, Radico operates three distilleries and one JV with total capacity of 150 million liters.
It also has 33 bottling units spread across the country.
Worst seems to be behind us in terms of regulation: Supreme Court, which had banned the sale of
alcohol within 500 mtrs of highways in Dec-16, provided some relaxation by allowing states to de-notify
highways within city limits hence De-growth in volumes is likely to halt and expected to pick up FY18
onwards. We believe Tax revenues from alcohol amount to a significant portion of state budgets and
hence it may practically be difficult to ensure total prohibition.
Radico has been focusing on increasing the share of premium products in its portfolio over the last few
years. It has in fact slowly discontinued its lower margin products in some of the markets due to higher
costs lower margins and time consuming process of increasing prices. With the changing
demographics and the company’s focus on premium brands, we expect margins improve going forward.
Future Enterprises Ltd
Investment Rationale
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 8915 4485 1041
EBIDTA 1083 993 257
PAT 44 54 -45
EPS 0.8 0.74 -0.96
Share Holding Pattern
KEY STATISTICS
CMP Rs. 51
MARKET CAP Rs. 2397
PRICE/BOOK 0.63
PE 68.91
DIVIDEND YIELD 1.46%
52 WEEK L/H 14/62
Department Stores BUY
Promoter 46.55%
Public 53.45%
To divest stake in Supply Chain business (SCB) through IPO: Future Supply Chain Solutions, the
subsidiary of FEL, plans to raise about Rs 750 cr through an IPO offer-for-sale. The company has filed
draft SEBI for a public issue. The SCB is one of the largest organized third-party logistics service
operators has 120 branches and 46 state-of-the-art warehouses in the country, including six logistics
parks.
Looking to monetize investment: FEL will continue to hold stakes in various Future Group companies
and joint ventures. The current Estimated Realizable Value of Investments would be around Rs 4,400 cr
and expected likely to be worth Rs 10000 cr in the next 3-5 years (As per Management Note). While it
will continue to own and manage these investments, it will continuously explore ways in which it can
monetize some or all these investments over the next couple of years. Monetization of only 1 or 2
investments has the potential to make FEL debt free beyond that any monetization can lead to value
creation for shareholders.
Insurance space in action after many insurance got listed: FEL has 2 holdings in insurance space
Future Generali India Life Insurance Co. Ltd & Future Generali India Insurance Co. Ltd. Gen Insurance
segment has posted gross written premium of Rs 1,595 cr and capital employed is Rs 448 cr while
Future Generali Life Insurance Co. Ltd. posted gross written premium of Rs. 593 cr and capital
employed is Rs 212 cr.
HIKAL LTD
Investment Rationale
Hikal operates in the two segments Pharmaceuticals and Crop Protection with revenue breakup of 60%
and 40%, respectively. Both businesses are run independently and have their respective Heads
(presidents). Management targets overall revenue growth of 12-15% for the next 5 years and target to
double revenues in the five years.
Pharmaceutical Segment – projects in various stages of clinical trials, world’s largest supplier of
Gabapentin, serves US, Europe and Japan, augurs a strong future for the company. It is into generic
APIs as well as Contract development and Manufacturing business (CDMO).
Crop Protection – focus is to diversify the product offerings, partner with new clients, introduce
several new products which are under development in R&D that will grow the revenue and increase
profitability in the near future. In the exports front, Europe and Japan are the key markets for Hikal.
R&D - ensures scale up from Lab to Commercialization in both Pharma (few of the products in
development stage to be off patent soon) and Crop Protection (~15% success rate of molecules of
herbicides, fungicides and insecticides going into commercial production) and venturing into animal
health big way.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 918 1013 263
EBIDTA 173 185 46
PAT 41 66 13
EPS 5.03 8.13 1.6
Share Holding Pattern
KEY STATISTICS
CMP Rs. 249
MARKET CAP Rs. 2043
PRICE/BOOK 0.33
PE 30.63
DIVIDEND YIELD 0.56%
52 WEEK L/H 181/259
Pharmaceuticals BUY
Promoter 68.77%
Public 31.23%
Huhtamaki PPL Limited
Investment Rationale HPPL Ltd is the only flexible packaging company in India with pan India presence. It has 13 fully integrated
manufacturing facilities at Thane, Silvassa, Hyderabad, Rudrapur, Navi Mumbai, Parwanoo, Khopoli, Tajola,
Ambernath and Bangalore.
HPPL derives >95% sales from the FMCG industry, which is set to revive with improving consumer
spending, led by Government's thrust on rural infrastructure. This should result in demand uptick for HPPL's
packaging products. With market leadership, reputed clientele & innovative offerings, HPPL is well placed to
capitalize on the available opportunities.
HPPL's parent 'Huhtamaki Oyj' is one of the top 10 consumer packaging companies in the world. With in-
house capabilities and parental support, HPPL would continue to widen its product portfolio, client base and
improve its exports share. India remains one of the key focus markets for the parent, which augers well for
HPPL.
Top 10 customers of PPL account for approx 60-65% of revenue. Some of its premium clients include
Britannia, Pepsico, Castrol, Coca Cola, Dabur, Emami, Eveready, GSK, Godrej, Hindustan Unilever, ITC,
Marico, Nestle, Pepsi, Perfetti, P&G, Tata Tea, Wipro and many more.
The Indian Packaging Industry is estimated to reach $72.6bn by FY20 (18% CAGR over FY15-20), with flexible
packaging estimated to grow at a faster rate of 25%, as the consumer preference is steadily shifting from
traditional rigid packaging, due to numerous advantages offered by flexible packaging.
Financial Overview (Rs Cr) FY 2015 FY 2016 FY 2017 Q2
Net Sales 1151 2178 551
EBIDTA 120 247 33
PAT 49 85 7
EPS 6.75 11.27 0.96
Share Holding Pattern
KEY STATISTICS
CMP Rs. 232
MARKET CAP Rs. 1750
PRICE/BOOK 3.56
PE 20.58
DIVIDEND YIELD 1.24%
52 WEEK L/H 201/296
Containers & Packaging BUY
Promoter 66.21%
Public 33.79%
SURYA ROSHNI LTD
Investment Rationale
Brand ‘Surya’ is well placed internationally and holds a prominent position in the Indian Steel
Pipes and Lighting industry. With such strong brand equity, the Company is well poised to
capitalize on the opportunities unfolding in the global market.
Government initiatives such as 'Make in India, Smart Cities and Housing for All' will provide better
growth prospects for both the businesses.
LED industry in India is witnessing a robust growth. The lighting industry in India is expected to
grow at a CAGR of 17% by FY2020. The Compulsory Registration Scheme from BIS is helping to
curb the unorganized sector, which further increases the growth prospects for the organized
players like Surya.
The new steel pipe capacity in South India would enable further penetrate the market: New plant
has been set up in Hindupur area of Andhra Pradesh that has increased its commercial
production capacity from 90,000mt pa to 1,50,000mt pa this shows the growing steel business of
Surya. Being plant set up in backward area they should also be eligible for incentives and
decrease their tax liabilities.
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 3197 3413 933
EBIDTA 242 230 51
PAT 63 66 12
EPS 14.3 15.05 2.68
Share Holding Pattern
KEY STATISTICS
CMP Rs. 307
MARKET CAP Rs. 1346
PRICE/BOOK 1.79
PE 20.39
DIVIDEND YIELD 0.70%
52 WEEK L/H 165/328
Lighting & Steel Pipe Products BUY
Promoter 63.32%
Public 36.68%
TOURISM FINANCE CORPORATION OF INDIA LTD
Investment Rationale
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 184 208 56
EBIDTA 165 164 52
PAT 53 70 22
EPS 6.64 8.73 2.73
Share Holding Pattern
KEY STATISTICS
CMP Rs. 140
MARKET CAP Rs. 1131
PRICE/BOOK 2.04
PE 16.03
DIVIDEND YIELD 2.43%
52 WEEK L/H 44/176
Financial Institutions BUY
Promoter34.14%
Public 65.86%
TFCI provides all forms of financial assistance for new, expansion, diversification, renovation/
modernization projects in tourism sector services sector and related activities, facilities and services.
Benefits from government initiatives: Indian Travel and tourism industry has huge potential and will
experience growth this year mainly because of the new visa reforms like e visa, medical visa to
encourage medical tourism, the proposed launch of Incredible India 2.0 etc.
Hotel industry is doing well: The company has a target of disbursements at Rs 700 cr for FY18 and that
of sanctions at Rs 1300 cr, which his almost 30% higher than last fiscal. The company has already
achieved 40-45% of target for disbursement and sanctions.
Working on reducing NPA: The Company aims to bring down their gross non-performing assets
(GNPAs) to 3.5% in FY18 from 6.5% in FY17 and the net NPAs to 0% by FY18 end.
World Travel and Tourism Council forecasts that the tourism industry in India is likely to grow at a
much faster rate in India compared to other SouthEastAsian countries. India is one of the biggest
travel and tourism economies in the world and contributes significantly to economic wealth and job
creation. We expect company like TFCI would gain more in line with the industry expectations.
GODAWARI POWER & ISPAT LTD
Investment Rationale
Financial Overview (Rs Cr) FY 2016 FY 2017 FY 2018 Q1
Net Sales 2222 2009 619
EBIDTA 235 306 101
PAT -99 -73 6
EPS -30.42 -22.42 2
Share Holding Pattern
KEY STATISTICS
CMP Rs. 118
MARKET CAP Rs. 416
PRICE/BOOK 0.6
PE -5.26
DIVIDEND YIELD -
52 WEEK L/H 54/138
Iron & Steel BUY
Promoter 67.36%
Public 32.64%
Presence across the value chain of the steel industry; GPIL is present across the value chain of the
steel industry, which commences from iron ore at one and extends to HB wires at the other. Besides,
within the energy value chain, the Company has extended its portfolio from waste heat recovery to
biomass to solar energy generation. The Company is one of the most competitive manufacturers of
intermediate and end products within steel sector, leveraging the benefits of scale, integration and
operational efficiency.
Expect to achieve higher healthy growth in Topline: Market conditions have improved in the last one
year time and that is reflecting in current performance, and management is confident in achieving 20-
25% growth in overall sales in the current year.
Awarded Long-Term Coal Linkages in the recently concluded coal linkage auction made by Coal India
With these coal linkages around 75% of the coal requirement of the Company shall be fulfilled which
reduces the cost and flows to improve margins going forward.
Continuous efforts to bring down debt: GPIL consolidated level is close to Rs 2,200 cr including Rs 200
cr of working capital debt. Company plans to reduce debt by about Rs 100 cr in current year and
double the reduction level in next financial years and so on.
Muharat Investment
Ideas 2016-17 Performance
Prices as on 13th October 2017
INVESMENT IDEA
Stock Name Industry
Rate
As on
Samvat 2073
Cmp
As on
Samvat 2074
Performance as
on date
INDIAN OIL CORPORATION LTD Oil Marketing & Distribution 319 414 30%
MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD Finance (including NBFCs) 364 420 15%
BIRLA CORPORATION LTD Cement & Cement Products 773 1006 30%
JAIN IRRIGATION SYSTEMS LTD Plastic Products 107 93 -13%
ADANI TRANSMISSION LTD Electric utilities 44 218 395%
ASHOKA BUILDCON LTD Roads and highway 162 190 17%
RAIN INDUSTRIES LTD Petrochemicals 52 206 296%
CLARIS LIFESCIENCES LTD Pharmaceuticals 303 346 14%
PRICOL LTD Auto Parts & Equipment 125 86 -31%
ELECTROSTEEL CASTING LTD Construction & engineering 27 29 7%
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MEHTA EQUITIES LTD BSE: - Membership Clearing No. 122 - SEBI Regn. No. INB010683856, NSE: - Membership Clearing No. 13512- SEBI Regn. No. INB231351231, NSE FO SEBI Regn. No.
INF231351231, CIN No: U65990MH1994PLC078478, MSEI: - Membership Clearing No. 51800 - SEBI Regn. No. INB261351234, Mehta Equities Limited, 902/903, Lodha Supremus, Dr. E. Moses Road, Worli Naka, Worli, Mumbai – 400018, India
Tel: +91 22 61507100 Fax: +91 22 61507102, Email: info@mehtagroup.in, Website: www.mehtagroup.in
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